Case Law Details
ACIT Vs Amartara Pvt. Ltd. (ITAT Mumbai)
Deeming section 50C cannot override another deeming section 45(3) which is specifically created by Income Tax Act, 1961
The issue under consideration is whether A.O. is correct by adding long term capital gains by applying section 50C in case where land is transferred by the partner in his firm as capital contribution?
The Hon’ble Tribunal has held that the deeming section provided in Section 50C cannot be extended to another deeming section created by the statue by Section 45(3). The Tribunal has noted that since the Act itself has provided for deeming consideration to be adopted for the purpose of Section 48 of the Act, another deeming section provided by Section 50C cannot be extended to compute deemed full value of consideration accruing as a result of transfer of capital assets by partner in a firm as capital contribution. The Hon’ble Tribunal has relied upon the decision of the Supreme Court in CIT v. Moonmill Ltd (59 ITR 574) for the proposition that one deeming section cannot be extended by importing another deeming section. Accordingly, the Hon’ble Tribunal has held that the profits and gains arising from transfer of a capital asset by a partner to a firm by way of capital contribution recorded in the books of account of the firm shall be deemed to be the full value of consideration for the purpose of computing capital gain.
Accordingly, the addition made by the AO while computing long term capital gain is hereby deleted and the appeal of the assessee is allowed.
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